Supply Chain Management Best Practices for Business

Supply chain management best practices

Use these supply chain management strategies to turn your supply chain into a competitive advantage. 

1. Strengthen working capital efficiency

Maximize working capital, shorten cash conversion cycles and stabilize cash flow with tools that reduce days sales outstanding and extend days payable.

• Supply chain finance: If your business sells products or services to a larger buyer, ask whether the company has a supply chain finance program. These are buyer-led, bank-funded early payment programs that allow suppliers to accelerate payments on their buyer-approved invoices maturing in the future. “These are desirable programs for suppliers, because they use the buyer’s credit to accelerate accounts receivable while preserving availability under suppliers’ own credit facilities for other activities,” said Demet Kologlu, Head of Core Trade Products Sales at J.P. Morgan.

  While large companies commonly offer supply chain finance, midsize businesses can also establish these programs to provide suppliers fast payment while maintaining credit reserves.  

• Accounts receivable finance: When customers don’t offer supply chain finance, consider receivables financing. This allows suppliers to sell invoices for upfront payment. “It’s effective when the supplier has sizeable deal flow with the customer, creating economies of scale,” Kologlu said. 

2. Invest in supplier relationships

Know which of your suppliers are business-critical and establish a supplier relationship management strategy to build strong, collaborative ties that create joint value.

Businesses with strong supplier relationship management monitor important suppliers’ health to prevent costly delays. They implement practices that keep suppliers financially healthy and stable, including balanced payment terms and development initiatives. 

Effective supplier relationship management unlocks efficiencies during normal operations and proves invaluable during disruptions. 

“The stronger your relationship with your supplier, the more likely you are to be at the top of their critical buyer list,” Kologlu said. 

3. Build resilience

Stress-test your supply chain to understand how it will react to disruptions and identify mitigation strategies. 

The most efficient supply chain isn’t always the one with the lowest costs. While the “just in time” model optimizes delivery timing and minimizes inventory and working capital requirements, recent disruptions—from the COVID-19 pandemic to tariffs and geopolitical tensions—have highlighted the value of balancing cost efficiency with adaptability.

Two main factors influence supply chain resiliency: 

• Inventory management: Strategic inventory reserves may tie up capital but maintain operations during disruptions like shipping delays. “Businesses are trying to balance between ‘just in time’ and ‘just in case,’” Shrivastava said. 
• Sourcing: Beyond tariff considerations on where to import goods from, also assess how those goods will reach their destination. “Consider a trade route’s vulnerability to disruption, whether by geopolitical tension or logistical nightmares, like a ship getting stuck and blocking passage through a major canal,” Shrivastava said.  

4. Use technology to get ahead

Artificial intelligence (AI) and machine learning can dramatically improve supply chain management efficiency. For example, suppliers could use AI to generate precise customer credit ratings, enabling tailored payment terms across a broader customer base. 

Nimble small- and midsize companies can leverage technology to gain competitive advantage, Shrivastava said. 

“The cost of those technologies is expected to come down dramatically. If you understand what AI can do for you, you can leapfrog larger, slower-moving institutions,” he said.